RNS Number:5310P
Avingtrans PLC
09 September 2003
Avingtrans plc ("Avingtrans" or "the Company")
Preliminary results for the year ended 31 May 2003
Highlights
* Satisfactory first year of operation as supplier of precision
actuators, spindles and related services to industry, despite
slow EU and US economies.
* Successful integration of the Jena Group, following its acquisition in
June 2002.
* Completion of the capital reconstruction of the Company in August 2003,
releasing the Company from the constraints on future dividends.
* Completion of the acquisition of Boneham and Turner Spindles in August
2003.
* Well placed to provide future growth in the event of a sustained upturn
in economic conditions.
Year ended 31 May 2003 Year ended 31 May 2002
#'000 #'000
Turnover 4,647 -
EBITDA 559 (498)
Profit before taxation 291 (309)
Basic EPS 3.3p (4.9)p
EPS before goodwill amortisation 4.2p (4.9)p
Ken Baker, chairman, commented: "Whilst business activity is still well below
2001 levels, a steady improvement in enquiry levels and order intake was
experienced in the last quarter of the year under review and this has continued
in the first quarter of the new year. With the acquisition of Boneham and Turner
Spindles and the distribution arrangements on the GMN spindle line for the UK
and Ireland, the Company's position in this field is greatly strengthened, and
significant benefits are anticipated in the future. The Company is well placed
to take advantage of a sustained upturn in economic conditions".
Enquiries:
Avingtrans plc
Ken Baker, Stephen King 0115 949 9020
Chairman's Statement
On behalf of your Directors it is my pleasure to announce the results of
Avingtrans for the year ended 31 May 2003. These results represent twelve months
of income from bank deposits and eleven months of income from the trading of the
Jena Group of companies ("Jena") following the acquisition of Jena on 28 June
2002. The business of Avingtrans since that date is the provision of precision
actuators, spindles and finishing services to the automation, machinery and
aerospace industries of the EU and USA. The aim of your Board is to build the
Company through organic growth and acquisition, with the objectives of
generating long-term earnings per share growth, cash generation and a
sustainable dividend policy.
Financial Performance
For the twelve months ended 31 May 2003, earnings before interest, tax,
depreciation and goodwill amortisation (EBITDA) was #559,000 (2002: #498,000
loss) on a turnover of #4,647,000 (2002: #Nil).
Operating profit for the period was #293,000 (2002: #498,000 loss). Profit
before tax was #291,000 (2002: #309,000 loss).
Earnings per share before goodwill amortisation for the year ended 31 May 2003,
was 4.2p (2002: 4.9p loss). Earnings per share after goodwill amortisation and
full dilution were 3.3p (2002: 4.2p loss). Both the earnings per share numbers
are stated after absorbing #70,000 of cost (1p per share) associated with
Advance Corporation Tax, interest and accountancy costs relating to repurchases
of shares in 1998 and 1999.
Cash flow from operations for the year was #281,000 with cash at bank and in
hand at the year-end of #1,083,000. The net cash balance on the 31 May 2003 was
#856,000.
The Directors are unable to propose a dividend payment for the year under review
due to the negative Profit and Loss Reserve in the brought forward Balance
Sheet. This problem has been addressed through a capital reconstruction of the
Company, which is explained further below.
Tax charges were lower than normal at 21.6% during the year due to losses
carried forward from prior years.
A favourable gain of #111,000 was recorded through the reserves during the year
on currency translation of foreign subsidiaries due to the increase in the value
of the Euro to the Pound since the acquisition of Jena.
Review of the Year
Avingtrans met the majority of its principal objectives during this, its first
year of operations as a supplier of precision actuators, spindles and related
services to industry. Jena was successfully integrated into the Company. New
systems of control and corporate governance were introduced. New auditors were
appointed. New banking arrangements and insurance cover was organised and a
number of administrative matters remaining from prior years were closed off.
These included the assignment of the remaining seven years of the lease on a
Grosvenor Street property at nil cost and the payment of ACT due on earlier
years' activities.
With a more concentrated focus afforded to the management, new opportunities
were developed in the actuator markets of the USA and the EU and during the year
the Company successfully expanded its spindle sales, repair and maintenance
activities by the addition to its portfolio of the exclusive sales agency for
GMN Spindles, covering the UK and Ireland. GMN is the premier company in the EU
for the design manufacture and supply of precision spindles for the machinery
and automation sectors and serve the same customer profile as our existing
actuator business.
The EU and USA, which are our principal markets, remained sluggish during the
first half of the year, despite forecasts of an early pick up. C&H Precision
Finishing Limited, the Group's UK turbine blade finishing facility and JRT Inc.,
the Group's sales and service outlet in the USA were particularly affected by
the continuing downturn in trade. Consequently, action was taken where required
to reduce the cost of labour in under-utilised plants through short time working
and lay-offs. As business activities improved during the second half of the year
more normal work patterns were resumed. Business activity, however, remained at
a lower level than expected through the year-end and the measures initiated to
protect profit margins remained in place. Capital expenditure on essential items
and replacement equipment was maintained at the planned level.
Acquisitions
Following the acquisition of Jena on 28 June 2002, a number of potential
acquisitions were reviewed during the year. Of these Boneham & Turner Spindles
became a "bolt on" asset and ongoing business purchase and was completed post
the year-end. It is commented on later in this report. The second, a profitable
private UK company in the business of providing electrical, project engineering
and maintenance services to the automation and machinery industry, has accepted
the Company's offer subject to due diligence and shareholder approval and
granted the Company an exclusivity period provisionally ending in October. Work
on this project continues. Both of these companies are seen as profitable growth
opportunities and a good fit for Avingtrans. The search for other suitable
acquisitions remains a strong element in the Company's growth strategy.
Directors and senior management
As reported in the Interim statement on 30 November 2002, a number of changes to
the Board were made on 28 June 2002. I was appointed Chairman of the Board,
Stephen Bruh, previously an Executive Director was appointed Non-executive
Director and Jeremy Hamer previously Chairman was appointed Non-executive
Director. Also on this day Steve Lawrence was appointed Executive Director. On
the 2 September 2002 the Board was pleased to welcome Stephen King, previously
with PricewaterhouseCoopers to the Board in the position of Finance Director and
Company Secretary. Shareholders at the AGM held on the 11 October 2002 ratified
all of these appointments.
In view of the increasing workload on the senior management caused by our
accelerating acquisition programme I have agreed to become Executive Chairman of
the Company with effect from 30 September 2003.
In accordance with the Articles of Association Jeremy Hamer retires from the
Board in rotation and offers himself for re-election at the AGM scheduled for 8
October 2003.
Revenue Reserves
As noted earlier in the report, the negative Profit and Loss Reserve shown in
the brought forward Balance Sheet, together with the operating loss recorded in
the previous year, prevented the Company from considering any proposals from the
Directors for dividend payments for the year under review and in addition
precluded the Company from attempting any acquisitions without incurring the
costs associated with a reverse takeover.
Accordingly an action was put in process in the last quarter of the year to
correct this situation. This process culminated in an EGM held on 17 July 2003
at which a resolution to cancel the Share Premium Account of the Company was
duly passed. Following this on the 20 August 2003, the High Court of Justice
Chancery Division approved the cancellation of the Share Premium Account of the
Company. Had the approval been received before 31 May 2003 the adjusted Profit
and Loss Reserve at 31 May 2003 would have been #3,435,000. These actions
release the Company from the constraints on future dividends. There is no impact
on the Net Assets of the Group.
Share Options
After another review of Company procedure, the Board proposes to amend the terms
of the Avingtrans plc Share Option Scheme. The present scheme is considered
unwieldy and out of date with current practice. Our Auditor RSM Robson Rhodes
LLP has drawn up a new EMI scheme in accordance with best practice corporate
governance and ABI guidelines. The new scheme will be implemented during
October. Copies of the Scheme are available for inspection at Avingtrans'
Registered Office during normal working hours.
Post Balance Sheet events
On 29 August 2003 Avingtrans through its UK subsidiary Jena Rotary Technology
(JRT) of Cossall, Nottinghamshire acquired the assets, intellectual property
rights, personnel and ongoing business interests of Boneham and Turner Spindles
(BTS) a division of Boneham and Turner Limited of Mansfield, Nottinghamshire.
Precision spindles are used in many forms of machinery and automation equipment
to transmit power to cutting tools and other mechanisms and are being developed
to meet the growing needs of the aerospace and other industries.
BTS will be integrated with Avingtrans' existing spindle operations and the GMN
distribution centre at JRT, forming the largest precision machine spindle
manufacturing operation in the UK. This combined operation will be cost
efficient and effective in serving the needs of the company's customer's
worldwide and is an important step in the growth of the actuator division.
Prospects
Whilst business activity is still well below 2001 levels, a steady improvement
in enquiry levels and orders intake was experienced in the last quarter of the
year under review and this has continued in the first quarter of the new year.
With the acquisition of BTS and the distribution arrangements on the GMN spindle
line for the UK and Ireland the Company's position in this field is greatly
strengthened, and significant benefits are anticipated in the future. Actuators
continue to be the Company's main business line which are designed and produced
at its modern factory in Jena, Germany and are distributed in both the EU and
the USA. Demand for this product remains strong, with new applications
continuing to evolve. The Company is well placed to take advantage of a
sustained upturn in economic conditions.
On behalf of the Board of Directors I should like to thank all the employees of
the Company for their continuing efforts during the year and their contribution
to its success.
Your Board looks forward to the new year and the prospects of continued
profitable growth with cautious optimism.
K.M.Baker
Chairman
9 September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 May 2003
Note 2003 2002
# '000 # '000
Turnover
Acquisitions 1 4,647 -
Cost of sales
Acquisitions (2,661) -
Gross profit
Acquisitions 1,986 -
Net operating expenses (1,693) (498)
Continuing operations 45 (232)
Acquisitions 315 -
Goodwill amortisation (67) -
Exceptional items - (266)
Profit/(loss) on ordinary activities 1 293 (498)
Interest receivable 66 190
Interest payable (68) (1)
Profit/(loss) on ordinary activities before taxation 291 (309)
Taxation on profit on ordinary activities 2 (63) -
Profit/(loss) for the financial year 228 (309)
Retained profit/(loss) transferred to reserves 228 (309)
Earnings per share:
Basic and diluted 3 3.3p (4.9)p
Basic and diluted - before goodwill amortisation 3 4.2p (4.9)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 May 2003
2003 2002
#'000 #'000
Profit/(loss) for the financial year 228 (309)
Other recognised gains and losses
- exchange gains on translation of foreign subsidiaries 111 -
Total gains and losses recognised since the last annual report 339 (309)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2003 2002
# '000 # '000
Profit/(loss) for the financial year 228 (309)
Issue of shares 400 -
Exchange gains on translation of foreign subsidiaries 111 -
Net change to shareholders' funds 739 (309)
Shareholders' funds at 1 June 4,041 4,350
Shareholders' funds at 31 May 4,780 4,041
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 May 2003
2003 2002
# '000 # '000
Net cash inflow/(outflow) from operating activities (see below) 281 (388)
Returns on investment and servicing of finance (2) 189
Taxation paid (135) -
144 199
Capital expenditure and financial investment (140) -
Acquisitions (3,371) (212)
Equity dividends paid to shareholders - -
Management of liquid resources - -
Financing 207 -
(Decrease) in net cash (see note 4) (3,160) (411)
NOTE: RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2003 2002
# '000 # '000
Operating profit/(loss) 293 (498)
Depreciation charges (net of loss on sale of assets) 199 -
Goodwill amortisation 67 -
Increase in stocks (101) -
Increase in debtors (98) -
(Decrease)/ increase in creditors (79) 110
Net cash inflow/(outflow) from operating activities 281 (388)
SUMMARISED CONSOLIDATED BALANCE SHEET
at 31 May 2003
2003 2002
# '000 # '000
Fixed assets
Intangible assets 1,400 -
Tangible assets 1,522 -
Investments 59 212
2,981 212
Current assets
Stocks 1,430 -
Debtors 913 1
Cash at bank and in hand 1,083 4,080
3,426 4,081
Creditors: Amounts falling due within one year (1,227) (252)
Net current assets 2,199 3,929
Total assets less current liabilities 5,180 4,041
Creditors: amounts falling due after more than one year (400) -
Net assets 4,780 4041
Capital and reserves
Called up share capital 352 316
Share premium account 3,611 3,247
Capital redemption account 813 813
Other reserves 180 180
Profit and loss account (176) (515)
Equity shareholders' funds 4,780 4,041
NOTES
1. SEGMENTAL ANALYSIS
Class of business
Precision Actuators and
finishing Spindles Goodwill Total Total
2003 2003 2003 2003 2002
# '000 # '000 # '000 # '000 # '000
Turnover 717 3,930 - 4,647 -
Operating Profit (13) 373 (67) 293 (498)
Net Assets 59 3,321 1,400 4,780 4,041
Turnover by geographical market
Precision Actuators and
finishing Spindles Total Total
2003 2003 2003 2002
# '000 # '000 # '000 # '000
Turnover by geographical origin
United Kingdom 717 362 1,079 -
Europe - 3,509 3,509 -
North America - 59 59 -
Rest of World - - - -
717 3,930 4,647 -
Turnover by geographical destination
United Kingdom 644 845 1,489 -
Europe 73 2,635 2,708 -
North America - 407 407 -
Rest of World - 43 43 -
717 3,930 4,647 -
2. TAXATION
2003 2002
# '000 # '000
UK corporation tax (13) -
Irrecoverable ACT 49 -
Foreign tax 36 -
Current taxation 73 -
Deferred taxation (10) -
Group tax on profit on ordinary activities 63 -
3. EARNINGS PER SHARE
Earnings per share and diluted earnings per share have been calculated on the
profit for the year of #228,000 (2002: loss of #309,000) and on 6,990,028 (2002:
6,322,531) ordinary shares, being the weighted average number of ordinary shares
in issue during the year.
4. ANALYSIS OF NET FUNDS
Other non-cash Exchange
changes Move-ments
1 June Cash flow 31 May
2002 Acquisition 2003
# '000 #'000 # '000 # '000 # '000 # '000
Cash at bank and in hand 4,080 (3,168) 189 - (18) 1,083
Bank overdrafts and loans (34) (42) (139) - (12) (227)
4,046 (3,210) 50 - (30) 856
Debt - 16 (16) - - -
Hire Purchase leases - 177 (654) (46) (54) (577)
- 193 (670) (46) (54) (577)
Net funds 4,046 (3,017) (620) (46) (84) 279
5. PRELIMINARY STATEMENT
This preliminary statement, which has been agreed with the auditors, was
approved by the Board on 4 September 2003. It is not the company's statutory
accounts. Statutory accounts will be sent to shareholders shortly.
The statutory accounts for the two years ended 31 May 2002 and 2003 received
audit reports which were unqualified and did not contain statements under s237
(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended
31 May 2002 have been delivered to the Registrar of Companies but the 31 May
2003 accounts have not yet been filed.
ENDS
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